It is quite common to find US companies that engage in collaborations and development of new intellectual property with business partners. From as large as Proctor & Gamble, to the smallest start-up company, many companies operating in the US actively source part of their capabilities outside of their own company, or related subsidiaries.

Even if you will have a small operation in the US, it should be aware that potential competitors could be collaborating in innovative ways with their business partners to create new products and services and/or to change the way existing products and services are delivered, with the hope of adding value to your target market and gaining market share. Companies in the US are embracing new technologies, through business partner collaborations and open innovation (ie. proactively sharing intellectual property in order to provider different or better products and services than currently exist).

Companies competing in the US market are usually motivated by the stiff competition and want to stay ahead of their competition. You may choose to go it alone in the US without engaging partners, but, in this day in age when convergence of business models, shorter life cycles of products and services, and sophisticated supply chains operating in an increasingly competitive global economy, it makes sense to at least stay open to the possibility of needing to collaborate with business partners to develop intellectual property and leverage supply chains so that your target market is drawn to purchasing your products and services over those of your competitors.

Having other business entities with a vested interest in your company making money is critical to your long term scale in the US. It is often a productive way to expand business operations in the US by relying on the strength of collaborative partnerships, that are tied to useful networks and innovative intellectual property. Equally as important, is for you to choose collaboration partners that align with your views and approach to business.

Good collaboration partners could help you create or enhance products and services that break new ground by solving real issues for local customers in ways that no single company, with its own intellectual property could.

A good collaboration partner for you should have some of the following characteristics:

• Established goodwill and profile with relevant segments of the US market (customers and competitors);
• An innovative and creative culture;
• No major conflicts of interest with you or your existing business partners;
• A need and/or desire to work with you, beyond short term opportunities;
• Willingness to invest time, money and resources in the collaboration and development of your existing intellectual property;
• Focus and commitment to leveraging the partnership;
• Established, useful intellectual property that you do not have;
• Solid supply chain connections; and
• Physical presence and an operating history in the US market.

Just as you need to research relevant US market and customer dynamics, if you are to successfully compete in the US market you should also invest the time and resources to do adequate due diligence on potential collaboration partners as well as nurture the collaborative relationships in which you enter.

How should you measure your return on investment and return on effort in a collaborative partnership?

It is quite common for US companies to measure their return on investment in a collaborative partnership by monitoring the revenue generated within a certain time period (ie. 18 months from commencement of partnership), as measured against a minimum target. Some US companies measure performance and market opportunities on a rigid financial basis. It is not unusual for companies to require an order of magnitude of new revenue equaling 100 times their initial investment of time, money and resources, within a defined period of time.

Other ways you could consider measuring the return on investment of a collaborative partnership is to look at:

• The amount of research and development dollars invested over time;
• The number and nature of jobs retained and created; and
• The amount of export revenue for products and services generated.

Whilst many companies measure their return on investment, it is less common (but just as important) for you to measure your return on effort.

Return on effort can be measured by you if you monitor:

• How easy is it to work with a collaboration partner;
• How well do the partners manage and minimize disputes;
• How long does it take from initial commercial discussions to signing a collaboration and/or joint venture agreement;
• How quickly does the partnership move in the right direction vis-a-vie its competition;
• Whether it is truly a “win-win” relationship;
• The amount of productive time spent physically together;
• Ability to securely share, access and build upon vital intellectual property and related sensitive information;
• The ability to initiate new directives that emerge from periodic strategic and relationship reviews; and
• Whether there continues to be a solid trust and business relationship beyond the short term.

In measuring return on investment and return on effort it is important for you to be practical and realistic, but, to measure the things that really matter to your long term business success.

How can you affectively manage a cross-boarder collaborative relationship?

It is often useful for a company to incrementally monitor the progress and success of its US market entry strategy. You should adopt a rolling 90 day review of your collaborative business relationships to determine whether desired milestones are being met.

You should track the progress of your business model, which may include organic growth as well as the use of distributors, franchisees, agents and licensees. It is important for you to understand, on an ongoing basis, relevant market opportunities that emerge, customer changing needs and wants, customer awareness of your product and service offerings and competitor dynamics.

There are other important business issues for a collaborative partnership, that should, but, are not frequently measured on a rolling 90 day basis, including:

• Whether a collaboration is attracting profitable deals;
• The size of the deal pipeline;
• Ratio of deals negotiated versus deals completed;
• Ability to leverage operational infrastructure, including technology resources;
• Value based engagements with external advisors (eg. lawyers and accountants);
• Managing and resolving disputes; and
• Leveraging the collective body of knowledge.

How can collaborating help you compete against value-driven competitors?

Often value-driven competitors compete strongest on price. You will need to establish and maintain a suitable response to the efforts of value-driven competitors to gain market share.

In addition to useful intellectual property, a good collaborative partnership will also give you access to better manufacturing processes, established supply chains and useful marketing and advertising channels, all of which are necessary to compete with value-driven competitors. Collaborative partnerships also have the potential to develop higher value propositions, greater than price, by building better products and services solutions, bundling offers as well as providing customers with a better buying and service support experience.